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Papa John’s Board to Discuss ‘Poison Pill’ to Block Founder From Gaining Control

John Schnatter has said his recent resignation as chairman was a mistake

Papa John’s board of directors is planning to discuss a shareholder-rights plan that would block the pizza chain’s controversial founder, John Schnatter, from gaining a controlling interest in the company.
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Danny Moloshok/Reuters

Papa John’s International Inc.
PZZA -0.16%
board members are planning to discuss and possibly vote Sunday morning on whether to adopt a “poison pill” to prevent its controversial founder from gaining a controlling interest in the pizza chain, according to people familiar with the matter.

The board in recent weeks has been trying to sever ties with John Schnatter, who founded Papa John’s 34 years ago, following revelations that he used a racial slur during a recent conference call.

Boards can adopt shareholder-rights plans, commonly known as poison pills, to block an investor from accumulating a majority stake in a company--a defensive move intended to thwart a hostile takeover. They are usually employed to block activist shareholders from gaining more control.

A company spokesman wasn’t immediately available to comment on Saturday.

Mr. Schnatter used the N-word in May during a conference call with his marketing agency that was intended to prepare him for his return as company spokesman. He publicly apologized for his use of the word and agreed to step down as board chairman earlier this month but said he has since second-guessed his decision. He explained in a letter to the board last week that he wasn’t a racist and didn’t use the word as a racial epithet.

Papa John’s board last Sunday voted to terminate some of its ties with Mr. Schnatter, including one that allows him use of an office at the company’s headquarters in Louisville, Ky. Mr. Schnatter’s attorneys are challenging the termination of those agreements.

The company also has suggested Mr. Schnatter resign from the board, according to people familiar with the matter.